If you've ever watched Jim Cramer's CNBC show, Mad Money, you know the guy is over the top. Most dismiss Cramer's tirades as entertainment more than thoughtful analysis, an assessment he might even agree with behind closed doors. Nevertheless, the guy is not an idiot. Cramer graduated magna cum laud from Harvard, later went to law school there, had a successful stint at Goldman Sachs and founded a hedge fund as well as TheStreet.com. Last Friday, Cramer went NUTS in his criticism of the Fed's attention (or lack thereof) to the current mortgage crisis. Take a look:
Great television for sure, but is Cramer on to something here? I'm certainly not an economist, but I do worry about how the mortgage mess will affect the larger economy. Diana Olick, a CNBC reporter who covers the real estate market, tends to agree--at least to some extent with Cramer's assessment. She states:
[Cramer] claims we have "no idea how bad it is out there." I think we do, I just think no one wants to admit it.
The fact is that according to a study by Credit Suisse, the bulk of the adjustable rate mortgages that were sold during the height of the housing boom, that is during the height of the most aggressive lending, will reset this fall, billions of dollars worth, and many many of the borrowers holding those loans will not be able to afford the resets.
This doesn't bode well for the holiday season. The Fed is meeting tomorrow so it will be interesting to hear their outlook on the economy. Expect (more) volatile markets for the next couple days.
